First time maxing Roth IRAs in January!

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guitarguy
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Joined: Mon Dec 20, 2010 4:10 pm

First time maxing Roth IRAs in January!

Post by guitarguy »

Pretty excited...for the first time here in 2021 we were able to max our Roth IRAs up front in January rather than doing the $500/m (x 2) route.

It's a little nerve racking pulling that much out of our liquid funds all at once, and also because the market is so boomy now and it could be a bubble...but then again what I've learned here: time in the market typically beats market timing...so done and done. I've got 15-20 years to retirement, and now it's a rather small blip in the overall portfolio...so I'm at ease with it!

It honestly feels great...no longer having to worry about doing it monthly is one less task I have to do! haha

The only minor downside is that the only international fund we hold is in Roth, so we're unable to sort of rebalance with new money to keep our 80/20 US/INT ratio...but no matter. Along with the big Roth contribution we did a full rebalance for the first time in a long while as we were about 4.9% off our targets overall for AA.

Thanks to all on this forum that have contributed with great advice over the years towards my family's financial health! :sharebeer
260chrisb
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Re: First time maxing Roth IRAs in January!

Post by 260chrisb »

I'm sure you will not regret this in the long term. If it's nerve racking to pull that much out of your "liquid" funds all at once do you mean from your emergency fund? If so, enhance it moving forward so you don't have these same feelings next year. Hopefully you don't look at your Roth as a savings or emergency fund when in fact it's a wealth building and retirement account. Well done and a great feeling.
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Cyclesafe
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Re: First time maxing Roth IRAs in January!

Post by Cyclesafe »

Its the right thing to do.

I did the same this time last year and rode it down to my anguish, but it came roaring back and there are no longer any regrets. Focus on the long term and you'll be fine. Any trepidation along the way will be behavioral. Savor the feeling to recognize that what doesn't feel good can be good for you.

Good luck.
"Plans are useless; planning is indispensable.” (Dwight Eisenhower) | "Man plans, God laughs" (Yiddish proverb)
Hyperchicken
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Re: First time maxing Roth IRAs in January!

Post by Hyperchicken »

guitarguy wrote: Wed Jan 13, 2021 7:51 am It's a little nerve racking pulling that much out of our liquid funds all at once, and also because the market is so boomy now and it could be a bubble...
This part I think could be quantified further.

Are you nervous to increase your market exposure? You can have the funds invested in the same assets outside of IRA, in a taxable account, so moving them to IRA does not increase your exposure, only gives you tax advantaged treatment.

Or are you nervous because your liquid funds are now depleted? Then a case can be made for increasing liquid funds first, or estimating how much liquidity you need, or considering Roth IRA as an extension of your emergency fund.
Topic Author
guitarguy
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Joined: Mon Dec 20, 2010 4:10 pm

Re: First time maxing Roth IRAs in January!

Post by guitarguy »

Hyperchicken wrote: Wed Jan 13, 2021 11:53 am
guitarguy wrote: Wed Jan 13, 2021 7:51 am It's a little nerve racking pulling that much out of our liquid funds all at once, and also because the market is so boomy now and it could be a bubble...
This part I think could be quantified further.
I should clarify...it was just a little weird “spending” $12k at once with a big contribution and seeing our savings account drop haha. No true, real trepidation whatsoever. Even if we are in a bubble and things go downhill in 2021...we are 15-20 years from retirement and will stay the course.

With the rebalance, all of our market exposure is where it’s supposed to be, and we have plenty of cash leftover (several months living expenses not incl Roth IRA).

I guess a better way to phrase it was that it was “weird” doing it this way after a decade plus of doing it month by month. I think, though, that I will quickly come to love doing it this way for its simplicity!
Hyperchicken
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Re: First time maxing Roth IRAs in January!

Post by Hyperchicken »

Next time wait a year, and do two years times two people = $24,000 or even more if contribution limit increases! :beer

And it sounds like you've been keeping the money in cash before contributing it. Nothing wrong with that, just want to mention that you could invest it in a taxable account throughout the year, and then move it over to Roth IRA once the contribution window opens (or whenever you want). That way there's no abrupt change in your market exposure at the moment of a large contribution.
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